Customer Information Systems (CIS), a hub for customer-facing and revenue cycle processing activity, is the most expensive item in a CIO application portfolio, taking up to 30% of an energy company’s application budget.
The CIS market has reached the third maturity level. The first stage (internally built custom solutions), a dominant CIS implementation model until the mid-1980s, was replaced by the proliferation of systems integrator (SI)-leveraged one-off solutions (e.g. Customer 1, Service 2000, IBM’s (Nipsco) CIS for MVS). In the mid- 1990s, SIs began exiting the CIS product market. That created an opportunity for independent software vendors (ISVs) like SPL WorldGroup, Indus, Peace Software, Lodestar and Soluziona, to enter the CIS product market and start building configurable CIS products aimed at meeting the requirements of the transitioning energy markets and the increased customer-centric focus required for retail competition.
Although a relatively small market (estimated <$1 billion worldwide) the significant growth potential, which was estimated to be 11% during the active retail market restructuring, attracted customer care and billing providers from other deregulated verticals such as telecoms (Kenan Systems, Custima, and Convergys), as well as enterprise solution providers (ERP: SAP, PeopleSoft, and Oracle; CRM: Siebel) which verticalised their offerings to meet energy markets’ needs. Concerned with functional complexity, lack of domain expertise, and sensing overall lack of demand due to a retail restructuring slowdown – market growth turned out to be less than half the initial estimate – many of them, in particular telecom vendors, have exited the energy CIS marketplace.
THE IMPACT OF DEREGULATION ON THE CIS FOOTPRINT
The traditional integrated energy utility CIS functional footprint (see Figure 1) was centred on revenue management, focusing on meter-to-cash business processes while extending into the customer relationship management, commodity management, and asset management areas just enough to support its primary business process focus. Energy retail deregulation created unbundling and bifurcation of the distribution utility value chain, forcing companies to pursue either energy retail or distribution businesses.
Two distinct sets of business drivers forced the CIS footprint to diverge, resulting in products with ‘CRM full’ and ‘CRM light’ functionality that met the needs of retail and network companies respectively. Leveraging deregulation as the main catalyst for legacy CIS replacement, and addressing immediate market needs, vendors extended the functional footprint into the CRM space and created a new set of customer-centric CIS products. To address commodity risk exposure introduced by vertical unbundling, CIS vendors also extended the product footprint into the energy commodity management space. Network companies with no requirements to retain existing or acquire new customers mostly opted to stay within the perimeter of the traditional premises-centric CIS systems, eventually retrofitting them to support required retail market interfaces.
The virtual standstill of retail market restructuring in the North American energy market, and the consequent trend toward rebundling the retail and distribution businesses, has created a misalignment between the current COTS (commercial off-the-shelf) CIS functional footprint and the requirements of most North American integrated distribution companies. This misalignment is the real culprit for the low CIS product demand among energy companies in the region. Without deregulation as the main driver for customer centricity and improved energy product and service time to market, the CIS products currently offered provide regulated energy companies with only incremental performance improvements and cost reductions in customer care and billing – not enough to justify costly CIS replacement.
Integrated energy distribution companies require CIS products with functionality that will extensively expand into the asset management area (for example EAM, WMS, OMS, mobile field service). This will enable them to achieve significant performance improvement by optimising complex business processes such as service order management, scheduling and optimisation.
Energy usage information should be included in the asset optimisation process (e.g., transformer load management) to achieve optimal use of the distribution asset, including loss minimisation. However, these functionalities should not be integrated into current COTS CIS products by inclusion at the data model level, thereby creating an even larger monolithic CIS footprint. Driven by financial adversity, energy companies are reluctant to invest in large enterprise systems and are hoping to achieve operational excellence by leveraging legacy IT investment.
THE ROLE OF METERING IN TRANSFORMING ENERGY MARKETS
Revenue-cycle unbundling in the retail segment, the past catalyst for increased investment in the metering area, is giving way to a new driver – the requirement for an energy data repository that can provide analytical CRM functionality (customer consumption analysis); reduce the risk inherent in energy commodity management in a vertically disaggregated energy market; and provide better utilisation of the delivery asset. An advanced metering platform will play a central role in transforming energy markets (as depicted in Figure 1) driven either by a need for increased CRM analytical and commodity managementm functions in competitive energy markets, or by a commodity and asset optimisation need in regulated energy markets characterised by a re-bundled distribution and retail function.
AN ADVANCED METERING INFRASTRUCTURE IS REQUIRED
The volatility of the wholesale energy market experienced in the past several years has uncovered the lack of an integrated supply/demand market structure, creating significant risk exposure for energy companies and requiring new IT systems and better processes for managing energy commodities along the energy value chain. The advanced systems for energy commodity management – on the retail side centred on providing wholesale price transparency to customers in the form of demand response systems, and on the wholesale side focused on supporting short-term scheduling or near-real time tuning of load forecasts – require an advanced metering infrastructure with a meter data management (MDM) system capable of collecting large amounts of metered and calculated usage data, stored as a time series and acquired with reduced latency.
Energy companies planning to use metering data to support energy commodity management will need to significantly extend the functionality of the traditional revenue-cycle-oriented metering system, which is focused on usage calculation as well as validation, editing, and estimation (VEE) functions. They will need to meet new scalability and archiving requirements, offer better methods of disseminating information to internal users and applications, and improve data acquisition sampling intervals by providing additional bandwidth on a fixed network communication channel (e.g. RF, microwave, cellular wireless).
NEW MDM SYSTEMS EMERGING
In addition to in-house-built applications, the MDM market will continue to be dominated by solutions provided primarily as an extension of the incumbent automated meter reading (AMR) vendor data collection databases, offered as either a licensed product or an ASP solution (e.g. Itron MV-90, CellNet, Logica, Invensys). Slow development of the retail market and virtual extinction of meter data management agents – an outcome of a revenue cycle unbundling model that supported a competitive metering function – results in limited growth in MDM systems focused exclusively on revenue cycle management and analytical CRM. A new breed of energy commodity MDM solutions based on advanced metering infrastructure (AMI) is starting to emerge, focused primarily on the retail segment and offered by CIS vendors that are extending their traditional CIS product footprint into the energy commodity management area. SAP ISU EDM, Peace, Lodestar, SPL CC&B are following this trend.
MDM based on advanced metering infrastructure will continue to evolve into an energy data management (EDM) market, with a commodity management focus. EDM solutions will start to diverge to support the specific needs of the retail and wholesale segment. On the retail side, in addition to incumbent AMR solution providers, CIS vendors will supply the new EDM environments, frequently using Web services as an underlying technology and using independent modules of the newly architected composite CIS solutions. The primary focus of retail EDM will be on demand response solutions, large commercial and industrial customers’ energy portals, and load aggregation, nomination and forecasting. The secondary focus of retail EDM solutions will be to support operational asset utilisation and outage management.
NEW EDM SYSTEMS NEEDED
Energy commodity management in the wholesale market will require new energy data management systems that will more closely resemble regional transmission organisation/ independent system operator EMS/SCADA solutions with regard to data acquisition and sampling frequency, observability, availability, and redundancy requirements than traditional revenue-centred meter data management systems. In addition to the AMR vendors who will try to extend their solutions into this market niche, a wholesale market need for settlement, near-real time load scheduling and load forecast tuning will be supported by EDM vendors coming from a SCADA/RTU and distribution management system intelligent electronic device background. These vendors will extend current EMS/SCADA or distribution management system offerings, reaching down into the wholesale metering area and dealing with familiar time domain and communication issues.
MDM product technical characteristics can be described as follows:
• Technical architecture: Most current MDM products are architected as n-tier applications that logically separate data server, application server and presentation layers. The preferred platform is Unix/Oracle for the data server, Windows as the application server platform, and a thin client/Web browser for the presentation layer. With the exception of SAP, which uses its own application server, current vendors like WebSphere, BEA and Oracle do not use commercial application servers. To address potential scalability issues, most products are built using scale-out architecture, although no official industry-wide scalability benchmark exists for MDM systems.
• Data collection: For all vendors, MDM products are the primary repositories for consumption of metered or calculated data, including some relevant information on meter premises and the meter’s physical characteristics. MDM products cover a wide range of consumption intervals, starting from monthly (used for residential retail billing) to two- to five-minute intervals (used for capturing peak demands) with a 15-minute interval being the most common. All products can store or collect data at intervals of less than 15 minutes. The collection interval is a function of the meter’s interval capabilities, and in most cases interval settings can be configured within the MDM product for arbitrary duration (usually not less than a minute). The OSIsoft PI system Universal Data Server offering can capture meter data at subsecond intervals. The interval size determines MDM RDBMS size as well as product scalability and performance. In most cases, products retrieve data from the field once per day. The retrieval frequency is a function of communications bandwidth rather than the meter data management product. For industrial and commercial interval revenue meters, as well as wholesale interval meters, MV-90 file downloads are the most common way of collecting meter data. MDM products that are hubs for residential consumption meters use AMR proprietary fixed networks for data collection.
• User access: Data collected and stored via an MDM product can be accessed online by internal users, in read-only mode by casual users and with read-write access for personnel with designated editing or validation privileges. A Web browser is universally accepted as the best method for external user access. Web access methods vary, ranging from the ability to download data in Excel file format to providing an Internet configurable environment (ICE) for user/customer portals. In the future, we expect all MDM vendors to standardise on external data provisioning via the use of service-oriented architectural concepts and Web services technology.
• Application interfacing: Batch file transfer, particularly for legacy systems integration (e.g. billing) is currently the most common way to integrate MDM products with internal applications, because of the batch nature of most billing applications. XML is the second most preferred method.
Due to the mostly departmental/line-of-business focus of meter data management products, none of the MDM vendors provides out-of-the-box plug-ins for enterprise application integration (EAI) environments such as Tibco, SeeBeyond, Vitria, WebSphere Integrator and webMethods, to facilitate integration within and between the enterprises. The current trend towards moving MDM functions into a shared services structure mandates an improved application/user interface and will lead to more advanced integration models like EAI and Web services. Some vendors apply Web services technology such as Microsoft’s .Net to reduce integration cost and extend product functionality via the use of external function providers that are in the “Internet cloud”.